Terminating employment is rarely an easy conversation.
For many SME owners, it can also be one of the most stressful aspects of running a business. Whether it’s poor performance, misconduct, long-term absence or a business restructure, getting the process wrong can expose your business to costly claims, damaged employee relations and significant disruption.
The good news is that most unfair dismissal claims don’t arise because an employer had a legitimate reason to dismiss someone. They arise because the process wasn’t handled fairly.
So, what are the most common mistakes SMEs make when terminating employment, and how can you avoid them?
Let’s break it down in plain English.
The Simple Answer
To dismiss an employee fairly, you generally need:
✔ A valid reason for dismissal
✔ A fair process
✔ Evidence to support your decision
✔ Consistent treatment
✔ Proper documentation
Having a genuine reason to dismiss someone is only part of the picture. You must also be able to demonstrate that you acted reasonably throughout the process.
Common Mistake #1: Acting Too Quickly
When an employee’s behaviour or performance becomes frustrating, it can be tempting to make a quick decision and move on.
However, dismissing someone without first investigating the situation is one of the most common mistakes employers make.
For example:
- Assuming misconduct without gathering facts
- Dismissing someone after a single incident without considering circumstances
- Failing to hear the employee’s side of the story
Before making any decision, take time to establish what has happened and whether there is a reasonable explanation.
Common Mistake #2: Not Following Your Own Procedures
Many businesses have disciplinary and grievance procedures in place but fail to follow them when problems arise.
This can create significant legal risk.
If your policies state that an investigation, meeting and right of appeal will be provided, those steps should normally be followed.
Consistency is important. Following your procedures demonstrates fairness and helps protect your business if your decision is later challenged.
Common Mistake #3: Poor Documentation
If an employment tribunal asks why an employee was dismissed, you need more than a verbal explanation. You need evidence.
This might include:
- Investigation notes
- Meeting records
- Performance reviews
- Written warnings
- Attendance records
- Copies of correspondence
Without documentation, it becomes much harder to demonstrate that your decision was reasonable and fair.
As the saying goes: if it isn’t documented, it didn’t happen.
Common Mistake #4: Ignoring Performance Issues Until They Become Serious
Many SME owners avoid difficult conversations because they’re busy or hope the problem will improve on its own.
Unfortunately, this often makes matters worse.
If an employee is underperforming:
- Raise concerns early
- Explain expectations clearly
- Offer support and training
- Set realistic improvement targets
- Review progress regularly
A structured approach gives employees a genuine opportunity to improve and shows that dismissal was not your first option.
Common Mistake #5: Treating Similar Situations Differently
Employees expect to be treated fairly and consistently.
If one employee receives a warning for misconduct but another is dismissed for a similar issue, you may struggle to justify the difference.
While every case should be considered individually, consistency is an important part of demonstrating fairness.
Always ask yourself:
“Would I have handled this situation the same way with another employee?”
Common Mistake #6: Overlooking Protected Characteristics
Employment decisions should never be influenced by protected characteristics such as:
- Age
- Disability
- Race
- Religion or belief
- Sex
- Pregnancy or maternity
- Sexual orientation
- Gender reassignment
Even where dismissal appears unrelated, failing to consider the wider circumstances can increase the risk of discrimination claims alongside unfair dismissal allegations.
If an employee has a disability, for example, you may need to consider reasonable adjustments before taking formal action.
What are Protected Characteristics? – JT HRConsultancy
A Practical Example
Imagine an employee has been repeatedly missing deadlines for several months. A frustrated manager decides enough is enough and dismisses them immediately.
The employee then brings an unfair dismissal claim.
Why?
Because:
- No formal concerns had been raised
- No performance meetings had taken place
- No improvement plan was provided
- No evidence was recorded
- No opportunity to improve was given
The issue wasn’t necessarily the reason for dismissal. The problem was the lack of process.
Had the employer followed a structured capability process, the outcome may have been very different.
What You Should Have in Place
To minimise the risk of unfair dismissal claims, make sure you have:
✔ Employment contracts
✔ Disciplinary and grievance procedures
✔ A performance management process
✔ Clear record keeping
✔ Regular employee reviews
✔ Consistent management practices
✔ Access to HR advice when needed
These foundations make it much easier to deal with difficult situations fairly and confidently.
Acas Code of Practice on disciplinary and grievance procedures | Acas
In Summary
Most unfair dismissal claims can be avoided by following a simple principle: be fair, be consistent and be able to evidence your decisions.
Before terminating employment, ask yourself:
- Do I have a valid reason?
- Have I followed a fair process?
- Have I documented everything properly?
- Have I given the employee an opportunity to respond or improve?
- Would my decision stand up to scrutiny?
If the answer to any of these questions is no, it may be worth pausing and reviewing the situation before proceeding.
Terminating employment will never be the most enjoyable part of running a business, but when handled correctly, it can be managed fairly, professionally and with significantly less risk.
And if you’re unsure how to approach a dismissal situation, we at JT HRConsultancy can help guide you through the process.
